Carney Hires McKinsey for Bank of England Strategy Rethink

Bank of England Governor Mark Carney
hired McKinsey & Co. and Deloitte LLP to review the central
bank’s resources and identify cost savings after it took on
expanded responsibilities.

McKinsey will work on a strategic plan examining the BOE’s
priorities for the coming years and Deloitte will help conduct a
“value for money” review focusing on operations including
information technology and human resources, the BOE said today.
Both companies were chosen after a competitive tender, it said.

The moves come just over three months since Carney took
charge of the central bank in July, when he made the strategic
plan one of his priorities. The review of resources will be led
by Chief Operating Officer Charlotte Hogg, a former McKinsey
employee, and follows the BOE gaining unprecedented powers to
regulate the financial industry this year in one of the biggest
revamps of the 319-year-old institution.

“The Bank of England plays a central role in the U.K.
economy and financial system, and influences developments in the
global financial system,” the central bank said in a statement
released by a spokesman. It has an “expanded set of
responsibilities” and the McKinsey review will guide
“strategic investment decisions, working methods, and
allocation of time and resources.”

Carney has already revamped the BOE’s monetary-policy
function, introducing forward guidance and linking the benchmark
interest rate to unemployment. In a question-and-answer session
on the central bank’s Twitter page last week, Chief Economist
Spencer Dale said the governor has “has new ideas, different
perspectives.”

It’s “very healthy for the bank,” Dale said.

Future Course

Hogg began as COO on July 1 -- the same day as Carney --
after leaving Banco Santander SA. (SAN) She started her career at the
U.K. central bank before leaving in 1994 to join McKinsey in
Washington.

The “intention for the strategic planning exercise for the
bank was to understand what had been done already, and to plot
the approach for the future,” Hogg said at a July 17 meeting of
the BOE’s Court, according to the minutes. “She wanted an
outcome where choices on resource allocation could be made.”

Hogg’s position was a new role at the level of deputy
governor and was created to assist Carney in managing the BOE,
which has now expanded to encompass parts of the former
Financial Services Authority. She is the central bank’s most
senior female employee.

Cost Overrun

“With so many responsibilities it’s actually hard to
prioritize which is their really key problem,” said Rob Wood, a
former BOE economist who now works at Berenberg Bank in London.
“If you had to pick something out, it looks like monetary
policy is starting to work and getting the economy moving now,
so perhaps the key priority is to ensure the financial stability
area is working efficiently.”

In April, the BOE’s then-finance director, Warwick Jones,
said information-technology costs had been higher than forecast
in the previous fiscal year. That was partly due to the
integration of the Prudential Regulation Authority, and Jones
said it would be “important to reverse” that as the merger was
completed.

At the July Court meeting, officials noted that spending
was slightly under budget in the current year and expected to
stay that way, according to the minutes. They also said that
income was below budget too.

The Deloitte value for money review will look for savings
in the BOE’s Central Services budget. The central bank said it’s
“incumbent” on the institution to be “as effective and
efficient as we can be.”

Two people familiar with the reviews said the assessment
may affect individual roles within the bank. The BOE will seek
to find alternative positions for those employees, according to
the people, who didn’t want to be identified because they are
not authorized to speak publicly. The assessments are due to be
completed next year, the people said.